Unhappy Canada vows to retaliate against any U.S. steel tariffs

OTTAWA (Reuters) - Canada will retaliate against any U.S. tariffs on steel and aluminum products, officials said on Thursday, as Ottawa faced what could be one of the biggest economic threats since Donald Trump became president.

Trump unveiled the tariffs on Thursday but did not make clear whether they would apply to Canada and Mexico, which together with the United States are trying to renegotiate the 24-year-old North American Free Trade Agreement.

“Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers,” Foreign Minister Chrystia Freeland said in a statement, calling any trade restrictions “absolutely unacceptable.”

She did not give details, and Canadian officials were not immediately available for comment on what measures she might have in mind.

Canada sends 75 percent of its goods exports to the United States and would be vulnerable if a trade war erupted. Canada is also the largest supplier of both steel and aluminum to the United States.

Miner Rio Tinto, the largest producer of aluminum in Canada, Alcoa Corp and the United Steelworkers union, which represents workers in both the United States and Canada, all said Canada should be spared from any tariffs.

A Canadian government official, asked whether Ottawa would be pressing for an exemption, said “Our efforts have never diminished nor altered” since the question of possible steel tariffs first emerged last year.

Canada buys more American steel than any other country, accounting for 50 percent of U.S. exports, and the steel and aluminum industry is highly integrated, Freeland said.

Joseph Galimberti, president of the Canadian Steel Producers Association, said there was still room for Canada to be granted an exemption.

“The government has been quite active ... in putting forward the case for our exemption and we expect them to continue to do so,” he said by phone.

The Trump administration - which Freeland generally describes as the most protectionist since the 1930s - has sought to impose tariffs on Canadian softwood lumber and aircraft over the last year.

Canada pushed back on both occasions and won a victory in January when a U.S. tribunal rejected Boeing Co’s calls for punitive duties against Bombardier Corp passenger jets.

“We will always be there to defend workers and industry. We showed it on softwood lumber and showed it with the Boeing case,” Trade Minister Francois-Philippe Champagne told reporters in Ottawa.

CIBC economists Royce Mendes and Avery Shenfeld said the tariffs “could be more biting for the Canadian economy than previous moves by the administration” and said the prospects for retaliation were limited.

“In many cases, Canada doesn’t have a domestic source of supply that would benefit from hitting U.S. goods with a tariff,” they said in a note to clients.

International trade lawyer Mark Warner said Canada could if it wished quickly apply tariffs on steel or aluminum or other targeted products.

“My hope is that the government does not respond precipitously in tone or action and continues to work for an exemption,” he said by e-mail.

Milos Barutciski, head of the international trade practice at law firm Bennett Jones, said Canada could also impose sanctions by applying for permission through the World Trade Organization - a process that can take 18 months.

Additional reporting by Susan Taylor in Toronto; Writing by David Ljunggren; Editing by James Dalgleish, Susan Thomas and Leslie Adler